Aussie slips after RBA raises rates

The Australian dollar is in negative territory today. In the European session, AUD/USD is trading at 0.6763, down 0.51%.

RBA raises by 50bp

The RBA isn’t getting much love, even after raising rates by 50 basis points earlier today. Investors responded to the rate hike by sending the Australian dollar lower, in a repeat of the Aussie’s fall after the August rate hike. The central bank has now raised the cash rate to 2.35% after four successive rate hikes of 50bp. The Australian dollar has lost ground despite the large rate hike, as the markets had priced in the move and aren’t showing any enthusiasm.

Today’s move brings rates close to the neutral level of around 2.5%, which means that the RBA is likely to deliver one more 50bp hike and then scale back to 25bp increases, contingent on inflation and the strength of the labour market. Governor Lowe’s rate statement didn’t add much and made no changes to the inflation forecast.

, Lowe will speak about monetary policy on Thursday, and the markets will be looking for some insights.

The RBA expects inflation to peak at just below 8% before the end of the year, dropping to around 3% by 2023. The economy is in relatively good shape, and the central bank is hoping to steer the economy to a soft landing and avoid a recession as higher interest rates slow down economic activity.

Market attention now shifts to the Australian GDP release on Wednesday, with the markets expecting an improvement in Q2. Domestic activity remains strong despite rising inflation, and Australia enjoyed a record trade surplus in June. This is expected to help boost GDP to 3.5% in Q2, following a 3.3% gain in Q1.

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AUD/USD Technical

• AUD/USD faces resistance at 0.6846 and 0.6922
• There is support at 0.6737 and 0.6661

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.

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